Nike, Under Armour Urge Trump To Lift China Tariffs On Footwear

Leading footwear companies in the U.S have come out against President Donald Trump’s China tariffs.

Many footwear makers including Nike, Adidas and Under Armour urged President Donald Trump to take out footwear from the penal tariffs list of Chinese imports citing higher burden on consumers.

Trump, on May 10, hiked tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent.

Catastrophic for consumers

“The proposed additional tariff of 25 percent on footwear would be catastrophic for our consumers, our companies, and the American economy as a whole,” the letter by a group of 173 companies said.

Another round of higher duties is expected to come up on $300 billion worth of Chinese goods at 25 percent in a few weeks’ time.

Noting that the industry is already facing a massive $3 billion duty bill every year, the companies said any increase in import costs will pinch the American footwear consumer badly.

The footwear industry’s concern reinforces the criticism of Trump’s claim that China will pay the tariffs. Trump’s economic affairs aide Larry Kudlow recently said “both sides” would pay.

According to Footwear Distributors & Retailers of America (FDRA), the hike in tariff would slap $7 billion of additional costs on U.S customers every year.

The average tariff on footwear ranges from 11.3 to 67.5 percent. If another 25 percent is placed on top of these, Americans will end up paying 100 percent duty on their shoes, the letter pointed out.

China is a key link in the supply chain

For the footwear industry, China is a vital link in the supply chain. China accounts for an average of 70 percent of all footwear imported into the United States, according to trade groups.

In the letter, the shoe companies made it clear that they cannot contemplate shifting production out of China.

China is an “important sourcing country and the consumer market for us,” Nike said in a regulatory filing.

The footwear manufacturers point out that footwear being a capital-intensive industry, years of planning go into sourcing decisions, and companies “cannot move factories in haste to adjust to these changes.”

China exposure varies among footwear makers

Nike makes almost 26 percent of its apparel and footwear in China. Skechers U.S.A makes a whopping 65 percent of goods in China’s production centers.

Under Armour's, 18 percent of products originate in China, and is down from 45 percent sourcing, six years ago.

As part of the effort to reduce dependence on China for production, many industry players had shifted production to Vietnam anticipating the Trans-Pacific Partnership (TPP) and duty-free exports to the U.S. But Trump scrapped those negotiations as soon as he came to power.